A growing business begins to immediately demand more funds to service its growing stocking needs, as well as cash to process raw inputs into finished goods and to finance sales made on credit. .
A few weeks ago, we discussed how to go about raising funds for your business, and highlighted the options available to young people starting a business from scratch. In the past, we have discussed the place of one’s own funds, as well as raising capital from friends and relatives, which is usually useful for achieving the milestones required to reach cash flow stage, where upon your business can now showcase its viability to venture capitalists.
A growing business begins to immediately demand more funds to service its growing stocking needs, as well as cash to process raw inputs into finished goods and to finance sales made on credit. This is called the working capital, and is used to finance the operating cycle of the business. The operating cycle is the heart of the business, while cash is the blood. If any cash problem occurs at this stage, death of the business is assured and fast.
